The failure of the Presbyterian Mutual Society - Treasury Contents

Written evidence submitted by representatives of the Presbyterian Church in Ireland

  1.  The representatives of the Presbyterian Church in Ireland welcome the opportunity to meet the Treasury Committee. While the Presbyterian Mutual Society (PMS) was not part of the Presbyterian Church, the Church is obviously very concerned about the consequences for many congregations and individual Presbyterians of the way in which the collapse of the PMS has been handled.

  2. The case for the PMS savers is very simple. They are the only savers in a distressed financial institution in the UK who, during the worst post World War II recession, have been denied access to their savings for nearly 15 months. It has been the Government's proud boast that "throughout this whole crisis, everyone that has been saving in a UK institution has been protected whenever there has been a difficulty in that institution". That has been so regardless of the culpability attaching to the institution for its failure.

  3.  If the other distressed institutions which the Government has bailed out, with their millions of savers, had been dealt with as the PMS has been, the country would simply have been ungovernable and the economy would have collapsed. It is a monstrous injustice that a small group of savers (some 10,000) in this part of the UK should be treated differently from the great mass of their peers.

  4.  For six months the Government took no interest in the matter. Under pressure, it conceded in June that a Working Group should be set up, to report to the Prime Minister in September. Seven months on, it has still not reported. The tardiness of the process is wholly unacceptable. PMS savers have displayed remarkable patience.

  5.  The delay also creates difficulties for the Administrator, who has recently made application to the courts for advice on various matters, including the basis on which he should make the initial distribution which he now proposes. This brings to the fore the issue of the status of loans and shares. Throughout the existence of the PMS, members' loan capital and share capital were treated equally, with no priority between them when the Society made distributions. A (presumably unintended) consequence of Administration under insolvency law was to introduce a hitherto unknown and artificial distinction between them. Any interim distribution or, still worse, any ultimate resolution of the PMS's difficulties which reversed the founding principle of mutuality and discriminated against the smaller savers would not only be a grossly unfair but also a hugely divisive outcome for Presbyterian congregations. The Church has made clear throughout to the Government the need for urgent resolution in order to pre-empt these problems. The Government appears not to take this seriously.

  6.  The only solution which can produce (at least cost to Government) the same outcome as was achieved for other savers in the UK (and, indeed, the Republic of Ireland), is for the assets and liabilities of the PMS to be absorbed by a substantial existing financial institution. The Church made a proposal to this effect to the Working Group early in August.

  7.  The Government was extremely dilatory in adopting the proposal and then in pursuing it, bearing in mind the remarkable expedition with which it rescued the UK's biggest financial institutions. We would have expected Government to call in the Heads of appropriate financial institutions, to indicate to them Government's unequivocal desire to put PMS savers into the same position as their peers elsewhere in the UK, and to seek a partnership with one or more of the institutions for that purpose. Instead, the Working Group has instituted a process with the financial sector which has dragged on for months in a manner wholly out of keeping with the urgency of the situation. We have drawn our acute concerns about this to the attention of the Secretary of State in a letter just before Christmas. Anything the Committee can do to induce the Government to conclude with the utmost urgency an arrangement with a financial institution which achieves the outcome set out at 6. above would be greatly appreciated.

Rev Dr Donald Watts, Clerk of the General Assembly

Right Rev Dr Stafford Carson, Moderator of the General Assembly

12 January 2010

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